Inventory Valuation Methods Quiz

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What is the Standard Cost Method based on?

Inventory sales value

Gross margin percentage

Normal levels of materials, labour efficiency, and capacity utilization (correct)

Actual cost levels

Which industry often uses the Retail Method for measuring inventories?

Manufacturing

Retail (correct)

Software development

Agriculture

What is taken into consideration when determining the gross margin percentage in the Retail Method?

Capacity utilization

Inventory markdowns (correct)

Sales value of the inventory

Labour efficiency

Why are inventory measurement techniques like the Standard Cost Method used?

For convenience if results approximate actual cost Signup and view all the answers

What aspect must be carefully determined when using the Retail Method for inventory measurement?

Gross margin percentage Signup and view all the answers

Which method considers materials, labour efficiency, and capacity utilization for cost measurement?

Standard Cost Method Signup and view all the answers

Which of the following costs should be considered when determining the net realizable value (NRV) of inventories?

Estimated costs of completion Signup and view all the answers

Under the FIFO (First-In, First-Out) method, how is the cost of sales calculated for the units sold?

The cost of the oldest units in inventory is assigned to the units sold Signup and view all the answers

What is the weighted average cost per unit calculated in the example?

$12.25 Signup and view all the answers

If the selling price of an inventory item has declined, what action should be taken according to the text?

The cost of the inventory should be written down to its net realizable value Signup and view all the answers

What inventory valuation method is used in the example?

Periodic inventory system Signup and view all the answers

What is the primary purpose of commodity broker-traders acquiring inventories?

To sell in the near future for profit Signup and view all the answers

When are changes in the value of inventories recognized in profit or loss for commodity broker-traders who measure their inventories at fair value less costs to sell?

In the period of the change Signup and view all the answers

Which of the following is a key term used in the standard related to inventories?

Work in progress Signup and view all the answers

What happens to inventories measured at fair value less costs to sell in terms of measurement requirements?

They are excluded from only the measurement requirements of the standard Signup and view all the answers

Which value are changes recognized in for inventories measured at net realisable value or fair value less costs to sell?

Profit or loss in the period of the change Signup and view all the answers

For what purpose do commodity broker-traders primarily acquire inventories?